Eliminating the Grocery Tax Should Come First

NASHVILLE – Chip Forrester, chairman of the Tennessee Democratic Party, urged the General Assembly Thursday to give working and middle class families top priority on tax cuts and move all tax relief efforts toward eliminating the sales tax on groceries.

“Tennessee has one of the highest grocery taxes in the nation, and hits our working families the hardest,” Forrester said. “If we’re going to cut taxes in this economy, we should start by cutting taxes to help our working and middle class families.”

In the proposal released by the governor’s office, there is $32 million budgeted for tax expenditures, including $14 million worth of tax giveaways for roughly 900 of Tennessee’s wealthiest estate owners.

Tax breaks for millionaires should not be a priority when there are so many Tennessee families struggling to put healthy food on the table, Forrester said, citing recent figures that show 360,000 — about one out of four — of Tennessee’s school-age children live in poverty.

“In times like these millionaires should be giving to charity, not getting it from the government. Our kids are our future, and they need help now,” Forrester said. “The wealthy have plenty of lawyers, lobbyists and politicians who will look out for them, they can afford to wait.

“Tennesseans are tired of seeing special interests get everything they want,” Forrester said. “Our working and middle class families deserve results, too, and this is a great opportunity to do something meaningful for all families.”

Under the governor’s proposal, about 900 of the state’s wealthiest estate owners would share a collective $14 million tax break by moving the estate exemption from $1 million to $1.25 million. Gov. Bill Haslam said his future plans include a $5 million estate exemption — a move that could result in an additional tax giveaway of $48 million for Tennessee’s millionaires and billionaires.

BACKGROUND

Everybody Eats, Everybody Benefits From a Tax Cut On Groceries. And Tennessee has one of the highest taxes on groceries in the nation. [PolitiFact, 1/24/12]

Only 900 of Tennessee’s Wealthiest Families Would Benefit From New Estate Tax Exemption. The Tennessean reports that 845 estates paid the tax in 2011. Under the governor’s proposed tax break, the roughly 900 annual estate taxpayers would share a $14 million break. Haslam says the $14 million tax giveaway for wealthy estate this year is just the beginning. He intends to increase the exemption to $5 million, which based on last year’s figures, could be a $48 million tax break for the wealthiest Tennesseans.  [The Tennessean, 1/24/12]

Haslam Proposes $7 Tax Cut for Working & Middle Class Tennesseans. Mr. Haslam’s .2% cut on the grocery tax would save working and middle class families an average of $6.57 a year — or $.20 on $100 worth of groceries. The Bureau of Labor Statistics estimates the bottom 80 percent of households spend between $2,500 – $4,300 a year on groceries before taxes. [BLS.gov, accessed 1/30/12; The Commercial Appeal, 1/11/12]

About One of Four School-Age Children in Tennessee Live in Poverty.  The U.S. Census Bureau estimates there are 1.5 million children in Tennessee. ["Poverty Surges Among Tennessee Kids," WBIR.com, 11/30/11; Census.gov, accessed 2/2/12]

Who pays the estate tax?
The state of Tennessee collected $83.5 million in taxes on 845 estates during the 2011 budget year.

A breakdown by size:
Estate size———————No. of estates——Tax collections
Less than $1.5 million———454—————$6.3 million
$1.5 – $2.0 million—————153—————$8.6 million
$2.0 – $2.5 million—————81—————$8.6 million
$2.5 – $3.0 million—————47—————$7.2 million
$3.0 – $3.5 million—————29—————$5.9 million
$3.5 – $4.0 million—————19—————$4.7 million
$4.0 – $4.5 million—————12—————$3.6 million
$4.5 – $5.0 million—————9——————$3.1 million
Greater than $5 million———41—————$35.6 million
Total——————————845—————$83.5 million

Source: The Tennessean, 1/24/12

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